A recent settlement under the False Claims Act reveals a startling and unlawful financial relationship between New Jersey’s Somerset Hospital and the nearby cardiology clinic Medicor Cardiology. The whistleblower complaint was filed by two hospital employees who reported the illicit payments occurred between 2009 and 2013. The final settlement amount was for a reported $431,526. According to court documents, the whistleblowers are set to receive $50,000 each for their role in bringing fraud to justice.

Under the False Claims Act, unlawful kickbacks are expressly prohibited. The policy behind this rule is that patients have a right to an untainted doctor-patient experience, and the government is unwilling to honor claims for reimbursement on behalf of any patient referred to a medical professional due to an underlying kickback agreement.

In the case against Somerset Hospital, allegations reveal that the hospital was making inflated rent payments to Medicor Cardiology in a thinly-veiled attempt to induce patient referrals. In other words, Somerset was paying rent to Medicor Cardiology, in an amount far above fair market value, in exchange for Medicor’s promise to refer patients to the hospital for treatment.

“Making inflated rental payments to induce referrals is no better than slipping a doctor an envelope stuffed with cash….Kickback arrangements undermine the physician-patient relationship and can lead to unnecessary treatment and higher costs. There is no room in our health care system for hospitals that abuse federal health care programs to boost their bottom line.”

While the hospital did not admit any wrongdoing as part of the settlement agreement, its kickback agreement with Medicor was hardly an isolated incident. According to the settlement agreement, Somerset is also involved in a kickback scheme with New Jersey-based sleep center RespaCare (also an inflated-rent case). Alarmingly, Somerset was referring Medicare patients to RespaCare, which is not a Medicare-approved provider, and subsequently billing the government for services rendered there under one of the relator’s Medicare provider numbers.

The hospital is also alleged to have offered reduced rent payments to several internists in exchange for the promise to refer patients to the hospital.

In a statement by the hospital:

“Somerset Medical Center did not admit liability or wrongdoing but agreed to pay $431,526.00 to resolve the matter with the government and avoid litigation costs….Somerset Medical Center takes its obligations to comply with all state and federal statutes and regulations very seriously. The institution has devoted more resources to enhance its compliance function and oversight.”

Conclusion

Healthcare fraud is the most common form of misconduct addressed by the False Claims Act. It often occurs in the form of kickbacks, such as those described above. It can also occur pursuant to unlawful billing practices, “upcoding,” or billing for services never rendered.

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